English, Article, Journal or magazine article edition: A general formula for the WACC: A correction Fernandez, Pablo

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Bookmark: http://trove.nla.gov.au/version/170485
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • A general formula for the WACC: A correction
Author
  • Fernandez, Pablo
Physical Description
  • preprint
Notes
  • This paper corrects some of the equations of Farber, Gillet and Szafarz (2006). The WACC is a discount rate widely used in corporate finance. However, correctly calculating the WACC involves properly calculating the value of tax shields, and the value of tax shields depends on the company's debt policy. Many authors [e.g. Inselbag and Kaufold (1997), Booth (2002), Cooper and Nyborg (2006), Farber, Gillet and Szafarz (2006)] have stated that debt policy can only be implemented by maintaining a fixed market-value debt ratio (Miles-Ezzell's assumption) or a fixed dollar amount of debt (Modigliani-Miller's assumption).
  • required return to equity; value of tax shields; company valuation; cost of equity;
  • RePEc:ebg:iesewp:d-0663
Language
  • English
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